Lowell looks to buy electricity to lower consumer costs

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Lowell is looking to tap a state law to help about 30,000 local households and businesses save money on their electric bills.

The city has adopted a plan allowing it to make bulk power purchases for city consumers if it can negotiate rates with suppliers below those charged by Lowell’s regular electricity provider, National Grid.

The municipal aggregation plan was recently approved by the City Council and will shortly be submitted to the state Department of Public Utilities for its review.

If the plan is approved by the state, Lowell would become the largest of a relatively small number of Massachusetts communities taking advantage of a local option made available by the 1997 law deregulating the state’s power industry.

“This is putting the entire city population’s buying power together,’’ said Thomas Moses, Lowell’s chief financial officer. “What we will do is go through a broker and see if we can beat National Grid’s price.’’

Moses said the program makes sense because municipal government “exists to provide services to its residents. This is a service to the residents.’’

Under the model, the city or town negotiates an agreement with an alternative supplier that is able to offer lower basic service rates than the local utility. The agreement covers all customers except those who decide to opt out.

The regular utility still delivers the electricity, but the selected company supplies the power, according to Brian E. Murphy, president of Colonial Power Group, the Marlborough firm chosen by Lowell to be its consultant and energy broker.

“The utility continues to maintain the power lines, read the meters, and send the bills,’’ Murphy said. “The only thing that changes is a line item on the bill in which the alternative rate is substituted.”

Municipal aggregation programs have become common across the country in recent years, according to Murphy. But although the Massachusetts law helped pioneer the concept, he said communities in this state have been relatively slow to embrace it.

A group of 21 communities in Barnstable and Dukes counties established a regional aggregation program shortly after the 1997 law took effect. More recently, Marlborough adopted a program in 2007, Lunenberg in 2011, and Ashland, Lancaster, and Lanesborough took advantage this year, according to Murphy.

In their initial contracts, Ashland and Lanesbourgh were able to negotiate rates that were 9 percent lower than those charged by the local utility, while Lunenberg negotiated a rate 5 percent lower, and Lancaster about 4 percent.

Murphy said there are times when the market does not provide a lower price. But he said communities that are not locked into contracts can pause their programs in those instances, something Marlborough did recently when it was unable to obtain a lower rate than its regular utility after having done so for five years.

Although Lowell officials said it is premature to estimate savings, Murphy is confident the city will be able to find a supplier to offer lower rates than National Grid.

“We talk with competitive suppliers almost every day. They are very excited to see the fourth-largest city in the state [about 107,000 residents] banding together and taking themselves to the market,” he said. “I think Lowell will get a lot of attention and a lot of competitive bids.”

According to Moses, the program does not cost the city any money because Colonial Power Group’s compensation will be derived from a small share of rate revenues resulting from any power agreements.

Murphy said aggregation does not hurt utilities because they profit from the delivery of energy, not from the sale.

“This initiative is a result of utility restructuring that was designed and intended to provide more choice for customers,” National Grid spokeswoman Deborah Drew said by e-mail of the Lowell plan. “It’s encouraging that more communities are looking at this as an alternative to Basic Service, the power supply or power generation portion of the electricity bill.”

Murphy said that if the state OK’s Lowell’s plan, the city should be ready to seek competitive bids in late March and to implement new rates in May.

City manager Bernard Lynch said that Lowell’s government has saved money by negotiating energy contracts with alternative providers and by making its buildings more energy-efficient.

“We just saw this as an opportunity to take those same ideas and help residents and small businesses save money in what they pay for electricity by using the city as a mechanism that could buy in bulk,” he said.

Once the program gets off the ground, he said, the city may want to expand it to allow residents to also have an option to purchase their electricity from a green power supplier.

Mayor Patrick Murphy said Lowell officials last year joined in support of legislation to make it easier to create municipal utilities after observing how they seemed to respond quicker after storms and offer better rates than larger network suppliers. Among the 41
in the state, there is a large cluster in the region, including Danvers, Georgetown, Groveland, Ipswich, Marblehead, Merrimac, Middleton, Peabody, Reading, Rowley, and Wakefield.

Murphy said the aggregation plan was an outgrowth of the local interest in the municipal utilities legislation, which is currently stalled.

“It’s a start to introducing at least some competition to provide lower rates . . . for our residents,” he said.